Coking

The Permian Basin is awash in light, sweet crude oil that’s cheap to produce and easy to process. It’s so awash, in fact, that supplies are overwhelming takeaway pipeline capacity. The resulting bottleneck in West Texas has cratered prices in Midland, where West Texas Intermediate (WTI) — the region’s light, sweet benchmark — has blown out price-wise against the same grade in other locations, including Houston, with its crude-export docks. Less well known, but influential beyond its geography, is Midland West Texas Sour, or WTS. WTS is suffering from the same wide differentials as WTI at Midland, and those yawning spreads are dragging down the price of Maya, Pemex’s flagship heavy, sour crude. Today, we discuss some surprising ripple effects of takeaway constraints out of the Permian.

Maya, Mexico’s flagship heavy crude, has been a key staple in the diet of U.S. Gulf Coast refiners for a long time, and it has faithfully served as a price benchmark for nearly all heavy crude oil traded along the U.S. Gulf, and points beyond.  Maya’s price, relative to lighter benchmark grades such as Louisiana Light Sweet (LLS) or Brent, provides ready insight into the profitability of heavy oil (coking) refiners. But production of Maya peaked in 2004 and has declined considerably since then, raising questions about its continuing efficacy as a price benchmark. Now it’s come to light that a component of the Maya price formula was changed effective January 1, 2017. Although the change—related to the formula’s fuel oil price component—might be viewed as a relatively minor tweak, it raises new questions about this important heavy oil price benchmark. Today we begin a two-part series on Maya crude, the new price formula and its potential effects.

US Complex refining capacity leads the world and US Gulf Coast refineries are enjoying an export led boom. As lower cost crude starts to become available to these refineries they should be in a strong position to compete even more efficiently in global markets. What makes these complex refineries competitive?  Today we conclude our two part refining tutorial by explaining refinery upgrading processes.

If you haven’t already read the first part of this tutorial then you can review it here. In Part 1 we provided an overview of the refining process described the fractions that make up crude oil and ran through the refined product outputs of a complex refinery. We looked at the first refinery process – atmospheric distillation that breaks crude down into its component fractions. Today we turn to the processes refiners use to upgrade the heavier residual fuel oil outputs from atmospheric distillation.